Though Twitter executives continue to deny that an initial public offering is imminent, all signs point to a different reality. In early August, USA Today
reported a LinkedIn
(NYSE:LNKD) job description posted by Twitter, seeking a financial reporting manager who would specifically be "responsible for preparation of monthly reporting materials, quarterly/annual financial statements, and Form S-1 when we are ready to go public." (Soon after the news broke, Twitter removed the posting). Last week, Alex MacGillivray, Twitter’s chief lawyer, announced that he would step down from his current role (though he will continue in an advisory capacity). Replacing him? Vijaya Gadde, Twitter’s new general counsel, who has been with Twitter for about two years, and has vast experience in corporate and securities law from her years at the Silicon Valley firm Wilson Sonsini Goodrich & Rosati. Just before the Labor Day weekend, Kate Jhaveri, a senior marketing executive from Facebook
(NASDAQ:FB), announced her new role at Twitter
, signaling even more momentum around Twitter’s effort to focus on revenue-generating activities. Finally, the Sunday Times
, a UK publication, reported on Sunday that Twitter was planning a $15 billion float, and cited anonymous sources.
Despite all the indicators, however, investors can’t truly gauge the potential opportunity the Twitter IPO presents until the company's financials are made public. Or can they?
As The Globe & Mail
reports, interested investors can get a piece of the pre-IPO Twitter by way of GSV Capital Corp
(NASDAQ:GSVC), a public fund that invests in high-growth venture-backed companies while they’re still private. Founded in 2011, GSV has provided investors exposure to privately held shares of tech companies including Facebook, Zynga
(NASDAQ:ZNGA), and Groupon
(NASDAQ:GRPN). Unfortunately, those offerings mostly disappointed investors and hit the GSV stock hard: Shares sank from a high above $20 to a low below $7 late last year. Currently, they’re trading back up around the $12.40 mark. (It is worth nothing that there are other private venture-backed funds with top holdings in Twitter, including Firsthand Technology Value Fund
But as Facebook’s stock is on the rebound, GSV’s is also up 60% and could in fact climb higher, especially given that its top five portfolio holdings include stakes in Twitter, Palantir (a software company serving the US government), Dropbox (rumored for IPO in 2014), Violin Memory (a flash storage company that filed for a $172 million IPO last month
), and online textbook provider Chegg (which recently selected JPMorgan Chase
(NYSE:JPM)and Bank of America
(NYSE:BAC) to lead its IPO). On its Q2 2013 earnings call
, which included a reported increase in net asset value of $0.18 to $12.87 per share, GSV Capital founder and CEO Michael Moe noted, "[M]omentum is building as we believe several of these later stage companies approach exit."
Despite the stock’s recent comeback, however, GSVC hasn’t realized gains, and its investors haven’t seen dividends. (Groupon and Zynga were realized as losses
in 2013, along with Top Hat 430, Serious Energy, and AltEgo.)
Should investors use the Facebook IPO as a cautionary tale... or place their bets on a pre-Twitter IPO? Sandeep Dhillon, practice leader for EMEA for technology, media, and telecoms research at Gerson Lehrman Group, says he believes that "there is potential for a large upside when Twitter lists valuation on the secondary markets -- and that it continues to increase as the company continues to grow." He points out that in early 2011, venture capital firm Kleiner Perkins Caufield & Byers invested in Twitter, valuing the company at roughly $3.7 billion. In March 2013, GSV Capital valued the company at $9.8 billion. Ultimately, Dhillon views a buy into Twitter as a lower risk compared to that taken by pre-IPO Facebook investors. "When they invested, there was no directly comparable social media company on the listed market. Twitter now has Facebook and LinkedIn. When Facebook went public, it was going through a pivotal change in its business with customers shifting to mobile, which at the time was not being monetized by the company."
Whether investing in GSV could in fact provide exposure to a prime pre-IPO Twitter opportunity is anyone’s guess; ultimately, it is up to GSV as to which of its stakes it chooses to hold and unload for investors' benefit. As Mark Holder of Stone Fox Capital (who is long on GSV) ultimately points out, "The major key to long-term performance is the ability to exit positions with significant profits."
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.